India Corporates, non-banking financial companies (NBFCs) and banks have been witnessing a steep rise in fundraising on account of recent fall in yields as lower interest rates for organizations typically help bring down lending rates, which in turn can push demand up. The spread between lending rates and yields further rose as the latter eased after banking system liquidity improved. Alongside the interest rate advantage, the appetite for corporate debt is also improving as the RBI’s recent move to withdraw currency notes of 2,000-rupee denomination is expected to boost liquidity.
NBFCs have raised around 100 billion rupees via bonds in the past few months and there is a rate arbitrage, which the NBFCs are utilizing between MCLR-linked bank loans and short-term capital market instruments, as short-end yields are edging lower. A glimpse of the growing debt raising momentum can be seen with the capital raise plans of NBFCs –
- National Bank for Agriculture and Rural Development (Nabard) is planning to raise at least Rs 5,560 crore by issuing bonds, with a green shoe size of Rs 6,370 crore.
- Mahindra & Mahindra Financial Services plans to raise Rs 300 crore, with a green shoe option of another Rs 300 crore,
- Tata Capital will raise Rs 500 crore through 10-year bonds
Funds mobilized through corporate bond issuances amounted to Rs 84,000 crore during May-June 2023, significantly higher than Rs 18,000 crore for the same period in the preceding year, according to RBI data.
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